Theodore Rapp lives and works in California, but the legal fight to recoup his pension benefits is playing out in a courtroom across the country in Connecticut.
The lawsuit, originally filed in the U.S. District Court for the Central District of California, was moved to the District of Connecticut because the company that acquired Rapp’s former employer has a provision in its pension plan that only allows disputes to be litigated in the federal court in Hartford, said Robert McKennon, Rapp’s Newport Beach, Calif.-based attorney.
These forum selection provisions—tucked into employee benefits plans—limit where plan participants can file a lawsuit. Attorneys say they not only drive up the cost of litigation and discourage people from suing for benefits they’re owed, they violate the law Congress passed to protect the millions of people who participate in employee benefit plans, which include retirement, pension, 401(k), health-care, disability and life insurance plans.
Rapp, who earned a middle-class income in sales, alleges the new company failed to keep records of his pension, which as of June 29, 2018, amounted to $46,843. McKennon, managing shareholder of McKennon Law Group PC, said he was forced to hire a local lawyer to help him fight Rapp’s case after it was transferred to Connecticut. Luckily for Rapp, the judge in Connecticut has allowed McKennon to participate by phone in a number of hearings, but he said the change of venue is still going to cost Rapp thousands of dollars more in attorneys’ fees and costs.
The Supreme Court, in a separate case, is now being asked for the fourth time whether forum selection provisions are enforceable under the Employee Retirement Income Security Act. The court previously has refused to weigh in on the issue.
The case pending the Supreme Court’s review stems from a lawsuit Jeffrey Robertson, a former Pfizer executive, brought against the Pfizer Retirement Committee and the company it contracted with to provide retirement information services.
Robertson alleges the committee and the Fidelity Employer Services Company LLC failed to inform him that the $715,507 he had racked up under the Pfizer Pension Plan couldn’t be rolled over to another qualified plan. As a result, he was forced to cash out his benefits and pay federal and state taxes.
Robertson sued for breach of fiduciary duty in the U.S. District Court for the Eastern District of Pennsylvania, where both the committee and Fidelity resided and where the claimed ERISA breach occurred.
But Pfizer, citing the plan’s forum selection clause, got the Pennsylvania court to transfer the case to the Southern District of New York. The court in Pennsylvania stayed the transfer until the Supreme Court decides whether or not to take Robertson’s case.
Attorneys say forum selection provisions shouldn’t be enforceable under ERISA because the law specifically allows participants and their beneficiaries to file a lawsuit against employee benefit plans in any one of three venues: where the plan is administered, where the breach occurred, or where the defendant plan resides or may be found.
“ERISA was enacted to protect plan participants and their beneficiaries, and it goes on to expressly give the participant the right to pick the venue,” said Eva Cantarella, a partner at Hertz Schram PC in Michigan.
Cantarella said her callers often comment on how hard is to find an attorney who will litigate their claims. She said forum selection clauses can it make it even more difficult.
“They may effectively be deprived of representation if they can’t find an attorney who will handle their claim for them,” she said.
A spokeswoman for Pfizer said, “We believe that this matter was correctly decided by the lower courts and will file our opposition to the petition later this summer.”
Letting the Issue Percolate
Appeal courts for the Sixth and Seventh circuits have ruled in favor of employers who say forum selection provisions are enforceable under ERISA.
The Sixth Circuit in 2016 said it had previously upheld the validity of mandatory arbitration clauses in ERISA plans, “which are, in effect, a specialized kind of forum-selection clause.” The ruling came despite the friend-of-the-court briefthe labor secretary filed calling the provision unenforceable.
In a dissenting opinion, Judge Eric Clay said Congress expressly sought to eliminate “jurisdictional and procedural obstacles which in the past appear to have hampered effective enforcement of fiduciary responsibilities.”
When that case was appealed to the Supreme Court, the justices asked Solicitor General Donald Verrilli Jr. for his view. He told the court the Sixth Circuit was wrong to enforce the venue selection clause, but asked the justices not to weigh in and instead let the issue percolate in the lower federal courts for a little longer.
Neither the Department of Justice nor the Labor Department responded to requests for comment as to whether the current administration maintains that opinion. The court has not received any briefs from the government. It is still waiting for the committee and Fidelity to respond.
Ripe for Review
Robertson, in his petition to the Supreme Court, said the case is now ripe for review, but not everyone agrees.
“There is no split yet in the circuits on this issue, and therefore it seems unlikely the Court would agree to accept the case,” said Charles Dyke, an attorney in the San Francisco Office of Nixon Peabody who leads the firm’s ERISA litigation practice. “The Sixth and Seventh Circuits have both held that forum selection clauses in plans are enforceable.”
Under ERISA, plaintiffs can recoup only their reasonable attorney’s fees if they achieve some degree of success on the merits. Dyke said a plaintiff who challenges a forum selection clause and loses on that issue may not be able to recover fees incurred litigating it. The defendant, he said, has to consider whether it’s worth the risk to try to enforce its forum selection clause if the plaintiff sues in a jurisdiction other than the one specified in the plan.
“The law is not yet settled, and that means each side has to think carefully about this issue when it comes up,” Dyke said.
Robertson’s case has not been scheduled for the court’s consideration.
A circuit split is typically a criteria for the justices to grant review of a case. Without differing opinions from the regional appeals courts on this issue, attorneys say it’s unlikely the court will agree to take the case.
But if they do, it may not go the way some plaintiff’s attorneys are hoping.
“Given their position on arbitration clauses and the current makeup of the court, they might land with the employers here,” said Chris Lockman, an attorney at Verrill Dana in Portland, Maine. He thinks they should.
“One of the major goals of ERISA is to advance uniformity and predictability in plan administration,” he said.
The case is Robertson vs. U.S. District Court for the Eastern District of Pa., U.S., No. 18-1341.